Barclays ups rating on Boohoo to 'overweight'
By Abigail Townsend
Date: Tuesday 11 Feb 2020
(Sharecast News) - Barclays has upgraded its recommendation for Boohoo, predicting that strong earnings momentum at the online fashion brand is set to continue.
The bank has an 'overweight' rating on the Aim-listed stock, compared to a previous 'equal-weight' rating. It also increased the price target, by 23.0% to 380.0p.
It said: "We believe Boohoo has a differentiated, cash-generative business model that delivers strong growth and impressive underlying operating leverage. We see room for consensus estimates to move up in 2021."
Barclays conceded it had missed some of the upside on the stock, but argued that risk/reward remained "skewered positively. We expect earnings momentum to continue, and sit 4% [and] 10% ahead of Bloomberg consensus earnings before interest, tax, depreciation and amortisation in 2021 [and] 2022."
Analyst Alvira Rao continued: "We argue that risks of core brands slowing in the UK are exaggerated; downsizing on the high street has created headroom for Boohoo; looking at revenues per month suggests conservatism in our modelling; Karen Millen and Coast can unlock significant value over time; and Boohoo's abnormally high returns are sustainable."
Boohoo bought the online businesses of Karen Millen and Coast out of administration in 2019. Last month, the retailer, which also owns PrettyLittleThing, upped its full-year revenue guidance after a bumper end to the year. In the four months to 31 December, total group revenues jumped 44% to £473.7m.
Shares in Boohoo were trading 2% higher at 329.80p by 1330 GMT.
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